Friday, March 2, 2012

Local Estimated Taxes - A New Requirement

Beginning in 2012, you may need to prepay your local earned income tax in periodic installments. If you expect your 2012 earned income on which there is no withholding to exceed $25,000, you should remit payments to the Lancaster County Tax Collection Bureau in April, June, and September 2012 and January, 2013. The due dates are the same as the federal and Pennsylvania installment payment due dates.

The Bureau will impose interest, penalties and fines for underpayments if four equal quarterly estimates are not paid.

However, there are three exceptions in the regulations. Interest, penalties and fines will not apply if you prepay 90% of the 2012 tax including tax remitted by employer withholding. You are exempt if you prepay 100% of the 2011 tax including payments made by employer withholding, or you can remit the installments based on the actual income earned in each calendar quarter.

The Bureau states that a married couple cannot file joint estimated taxes. The voucher must show only one person’s name and social security number. Otherwise, a support schedule must be attached showing the payment allocated to each individual.

There is much we do not yet know. It appears that the Bureau may impose interest, penalties and fines on an individual basis. In other words, your spouse’s 2012 withholding may exceed 100% of the 2011 tax on your joint local return but you may still be subject to interest if you do not meet any of the exceptions on your own. And how are we to qualify for the third exception for the June and September payments when the due dates precede the end of the calendar quarter?

As required by the United States Treasury Regulations, you should be aware that this communication (including any attachments unless expressly stated otherwise) is not intended by the sender to be used, and it cannot be used, for the purpose of avoiding penalties under the United States federal tax laws.

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